House Finance Commitee Wants to Allow Stores to Set Minimums & Refuse Cards

[frank22]

http://www.cspnet.com/ME2/Audiences/dirmod...93CD5C4ED7C9205

 

I am going on the prior post having an unfortunate word in it's title, an ugly, ugly word. This subject goes to the main topic of this section.

 

 

When grocers decide to accept Visa and MasterCard in their stores, they must agree to abide by all Visa and MasterCard rules and all future rules, said Miller. Visa and MasterCard can change the rules at any point and are not obligated to inform the merchants, FMI said in a statement commending Welch and Shuster.

 

 

Also, Duncan warned that credit-card companies are in an "arms race" to increase interchange fees and urged passage of the legislation, which would put rules governing the fees under the jurisdiction of the Federal Trade Commission (FTC).

 

"There is an arms race to create cards with higher fees and more bells and whistles," he said. "The market checks that would normally exist to curb this escalation in fees are diminished because the card companies know that every merchant is required to take these expensive new cards or lose their ability to accept any cards."

 

The Welch-Shuster bill would require credit-card companies to disclose interchange rates, terms and conditions and give the FTC authority to review interchange and prohibit any practices that violate consumer protection or anti-competition laws. Merchants would be allowed to give cash discounts and set minimum credit card purchase amounts, and could choose which credit cards to accept.

 

The bill "would allow the most expensive cards to be refused, and while we expect that few merchants would actually refuse cards if this were passed, it would make the card companies think before they reflexively introduce cards with higher fees," Duncan said.

 

"Most consumers don't know it, but every time they swipe a rewards card with its miles and concierge services, they are driving up the price of everything they buy even higher," he said. "This particularly hurts less-privileged Americans who don't have rewards cards or can't get cards at all because Visa and MasterCard rules effectively require that everyone pay the credit-card price even if they are paying with cash, check, debit card or even food stamps."

 

He added, "There is no regulator that reviews whether credit-card company rules are unfair, deceptive or anticompetitive. This legislation would deal with this absence of oversight by directing the [FTC] to review card company rules and prohibit practices that meet that description. That is the minimum level of protection that this market needs to begin to function properly."

 

Interchange is a fee averaging 2% that Visa and MasterCard banks charge merchants each time one of their credit cards is swiped to pay for a purchase. But Duncan explained to the committee that the rate can range from as low as about 1.5% for an ordinary card to 3% or more for "gold" and "platinum" cards that offer rewards like travel miles or concierge services. In recent years, card companies have created an escalating series of rewards cards—each carrying more rewards but also higher fees—and "upgraded" millions of consumers. The higher-fee cards cannot be turned down by merchants because of Visa and MasterCard's "Honor All Cards" rule.

 

Visa and MasterCard rules effectively force merchants to pass the fees on to consumers by requiring them to be included in the advertised price of merchandise and making cash discounts difficult; the result is that the average household paid an estimated $427 in higher prices last year, up from $159 in 2001, NRF said.

 

 

This is a bill I of course endorse. It would break the monopoly of the CC's and make for a more competitive environment. This rule would give the merchants power to say no, and this power alone would change the costs associated with the cards. The processors would respond by making the fees more friendly for all. The banks want to encourage wide credit card use, they would not let this bill slow the use down, they would respond. The merchants and consumers would benefit by cheaper processing. The power of the merchants to set minimums would make the processor reduce the per swipe fee that is only high for the small merchants. This would enable them to afford the lower priced purchases. It is a win, win. Unless you are a processor.

 

As to the extra rewards fees, this is a marketing effort by banks to get you to use their cards. More like a ponzi scheme. You could say it is to encourage cards in general, but these fees are just being imposed on the merchants, and it offers little if any benefit to them. If the banks want to encourage the use of their cards, they should eat the marketing costs or at least get merchant approval. Now banks are starting to charge the card holder for their use also- double dipping. There needs to be at least some pricing pressure on these banks, we all win.

 

I know most people reading this would disagree with me, but I think most people in general will like this law, especially when the aftermath means lower costs credit usage.

Edited October 14, 2009 by frank22

[improper_validation]

Another letter to write- completely unacceptable.

 

The government allowing merchants to set a minimum? BS

 

The government allowing merchants to decline rewards cards? More BS

 

-I'm sure Visa/MC/AMEX/Discover will band together and lobby like hell .

[centex]

I've got no objection to the minimums. Have some qualms with the ability to reject certain types of card given the way some programs change seemingly overnight...

[GEORGE]

NO MINIMUM ON A CREDIT CARD

 

NO MAXIMUM ON A CREDIT CARD

 

NO FEE TO USE A CREDIT CARD

 

NO ID ON A SIGNED CREDIT CARD

 

or

 

THEY GET $0.00 BUSINESS

[thelowpriceleader]

I think the foolish grocer who is complaining about how much it costs to process a card to sell a bag of chips or a pack of gum might as well just reject my business. They will spend more time telling me they are not going to take my card and returning the product to the shelf than the 20cents it would have cost them to just ring up my purchase and process my card. Not to mention they will lose my repeat business.

 

Some businesses are "small" for a reason.

[GEORGE]

That credit card fee is TAX DEDUCTABLE (don't MICRO-MANAGE the fee at the expense of paying business)

[improper_validation]

Sending my letter today . I basically say the Government has no business getting into this, card issuers would make cards look plain and there would be no way to tell rewards from standard.

[hurricanesfans27]

That credit card fee is TAX DEDUCTABLE (don't MICRO-MANAGE the fee at the expense of paying business)

 

 

maybe the business wants to pay more taxes since their income would be higher

[frank22]

Another letter to write- completely unacceptable.

 

 

-I'm sure Visa/MC/AMEX/Discover will band together and lobby like hell .

 

Did you ever stop to think that when you are on the side of the CC Industry and bank lobbyist you may be on the wrong side?

 

I think the government has a right to get into it because of the real monopoly as the article relates. I really hate that the government needs to get involved in anything, as ideally I am a libertarian. It is just that power corrupts and this is one of the industries that overuse their power.

 

The thing is nothing happens in a vacuum, the industry wants us to automatically reach for our card when we make a purchase. They do not want any thought process or extra costs to us. The merchants want to accept cards. They will work it out. Now, there is no incentive for the banks to work with the merchants. Change the game by giving the merchants choice and you change Visa's motivation. The CC industry would need this to happen. In the long run all that would happen is that small merchants would pay a reduced swipe fee and no merchants would pay extra for reward cards. I have brought this up before and no one has commented on it, but this is an important point. In the long run everybody wins, because the CC industry really wants use the cards more, not less. They will make it happen even with this law.

Edited October 15, 2009 by frank22

[frank22]

I think the foolish grocer who is complaining about how much it costs to process a card to sell a bag of chips or a pack of gum might as well just reject my business. They will spend more time telling me they are not going to take my card and returning the product to the shelf than the 20cents it would have cost them to just ring up my purchase and process my card. Not to mention they will lose my repeat business.

 

Some businesses are "small" for a reason.

 

First of all it is normally more than $.20 and second if it is such a small amount to you why not agree to pay for the total cost of the goods and services by also paying the swipe fee? This is not proposed, I am just throwing it out for argument purposes. A store that has many small transactions cannot make up the loss with volume. They just lose more money. This "foolish" merchants is just trying to manage costs.

 

To your points that you would elect to not frequent the establishment. That is between you and the merchant and not between you, the merchant and Visa. So if you take away Visa, the decision is right where it should be. You should be able to decide if you want to frequent them or not, and the merchants shouldn't be forced to do business with you if they don't want. A merchant shouldn't have a transaction forced on him. Especially ones at a loss. Let the merchant balance customer service, price and costs, like he does with every other cost of business. Let freedom ring.

 

To reply to George's often made point that it is a TAX DEDUCTIBLE cost of business. Tax deductibility doesn't come into play because all expenses are tax deductible, and you can not ignore an expense because of that. By that logic clerks could get paid $100 an hour, why not it is deductible? As to it being a cost of business, yes it is. That is why it needs to be managed. Expenses are always a cost of business, that does not mean it shouldn't be managed. All the law allows is for the expense to be managed like any other cost.

Edited October 15, 2009 by frank22

[improper_validation]

In any case, I am sure the big CC Banks will lobby enough to stop this. .

 

I know PayPal has a service called macropayments- they charge 5% + .05, do real merchant accounts provide anything like this?

Edited October 15, 2009 by wcnghj

[centex]

It is FAR too easy to criticize the small business for wanting to manage costs when they are in the midst of being culled by the mega-stores quicker than some mining companies can clear-cut a swath of land...when margins are already thin because you are competing against companies that can afford to take losses on certain items (by virtue of the ability to Enron-ize their accounting), it is comical to fault the small business owner for being concerned.

[Uncle Leo]

Sending my letter today . I basically say the Government has no business getting into this, card issuers would make cards look plain and there would be no way to tell rewards from standard.

They'll laugh. 80% of what the gubment does they technically "have no business" doing. Hasn't slowed them down so far, because they just flat-out disagree.

 

Not that one letter would make a difference anyway, but if many people wrote, I think a different reason would be more effective. Point out the reason it would hurt the poor, or hurt minorities, or something like that.

[BBQ123]

The no minimums / maximums / fees / honor all cards helps businesses, consumers, and the banks.

 

More convenient for customers to always be assured their card can be used.

 

More profit for the banks

 

More profit for businesses because without credit card acceptance people would go elsewhere / not shop

[frank22]

The no minimums / maximums / fees / honor all cards helps businesses, consumers, and the banks.

 

More convenient for customers to always be assured their card can be used.

 

More profit for the banks

 

More profit for businesses because without credit card acceptance people would go elsewhere / not shop

 

The text of the article disputes your view. Of course more profit for banks, I am not looking for more profits for the banks. The merchants don't think it is more profits for them. Who are you to tell them what is? And I as a consumer think I end up paying more for things. Maybe you should get Coke to force the merchant to sell it cheaper. The will sell more, more profitable for them, right? Doesn't make sense if you have to tell them that, it must not be true.

 

Your point seems la la land: In your view everybody wins, the added costs is worth it to everybody. It isn't the real world at all. That the costs are hidden from us doesn't mean they don't exist. It just means we will pay more

 

The fees have been going up substantially only because the merchants have been told either take the increased fees or you can't take the cards. They have no pricing power and this is the problem I have with it. What you are saying to the merchants is I want you to pay whatever the bank wants, and I don't want to pay one nickel for it. Eat it.

 

The fees would come down if the merchants were giving options because the banks would have to respond. So we would actually pay less. Many that post in this section say they will not do business with the merchants who don't accept the cards, it goes to the monopoly the banks have. They must accept the cards and whatever fees are forced on them or you won't do business with them, but you refuse to pay for the added costs.

 

It is a convenience for consumers to always know, but should convenience be legally protected? Also, the banks recognize the value of convenience so, they will do what they can to encourage our continued use of the cards by coming to a more reasonable fee structure for the merchants, especially the small ones.

Edited October 20, 2009 by frank22

[centex]

The no minimums / maximums / fees / honor all cards helps businesses, consumers, and the banks.

 

Obviously it does NOT help ALL business, else you would not have this ongoing insipid battle over stores trying to avoid taking a loss on dinky-flowers sales...

 

More profit for businesses because without credit card acceptance people would go elsewhere / not shop

 

Not necessarily...MOST people can and would make a purchase using another medium of exchange (ie. cash) if a store said they could not take the card for the $1.29 bottle of soda.

 

The reality is that MOST people do not live their lives around whether a store will take their credit card for a fifty cent purchase.

[Uncle Leo]

The reality is that MOST people do not live their lives around whether a store will take their credit card for a fifty cent purchase.

Word.

[GEORGE]

IF THEY WANT A FEE or HAVE A MINIMUM AMOUNT TO CHARGE...they sure don't want my business

[radi8]

The reality is that MOST people do not live their lives around whether a store will take their credit card for a fifty cent purchase.

Word.

 

Nor would most stores care about a single customer or two going "elsewhere" because of a credit card policy. Esp if that customer was only going to create a loss by charging what should be pocket change.

[frank22]

IF THEY WANT A FEE or HAVE A MINIMUM AMOUNT TO CHARGE...they sure don't want my business

 

Your right they don't. Now you are forced on them.

[GEORGE]

The reality is that MOST people do not live their lives around whether a store will take their credit card for a fifty cent purchase.

Word.

 

Nor would most stores care about a single customer or two going "elsewhere" because of a credit card policy. Esp if that customer was only going to create a loss by charging what should be pocket change.

Many ASSUME that when somebody charges under $1 that they ALWAYS do that

 

Like last week they were not there spending $100+

 

The week before they spent $250

 

(THAT WAS THEIR TWIN BROTHER)

 

They don't always spend real big...but they don't ALWAYS spend less than $1 either

[hurricanesfans27]

sometimes ill spend 1.25 instead of 1.00

[frank22]

The reality is that MOST people do not live their lives around whether a store will take their credit card for a fifty cent purchase.

Word.

 

Nor would most stores care about a single customer or two going "elsewhere" because of a credit card policy. Esp if that customer was only going to create a loss by charging what should be pocket change.

Many ASSUME that when somebody charges under $1 that they ALWAYS do that

 

Like last week they were not there spending $100+

 

The week before they spent $250

 

(THAT WAS THEIR TWIN BROTHER)

 

They don't always spend real big...but they don't ALWAYS spend less than $1 either

 

That is for the stores to decide, many people buy the same type of things at a store, the soda buyer might not be the gas buyer and MOST do not think like you do and boycott the big purchases because they wouldn't let one charge the small. People are much more reasonable and flexible in that regard. And again, even if you are right it should be for them to decide. It is their store after all.

[radi8]

The reality is that MOST people do not live their lives around whether a store will take their credit card for a fifty cent purchase.

Word.

 

Nor would most stores care about a single customer or two going "elsewhere" because of a credit card policy. Esp if that customer was only going to create a loss by charging what should be pocket change.

Many ASSUME that when somebody charges under $1 that they ALWAYS do that

 

Like last week they were not there spending $100+

 

The week before they spent $250

 

(THAT WAS THEIR TWIN BROTHER)

 

They don't always spend real big...but they don't ALWAYS spend less than $1 either

 

I suspect the number of people who would leave the store and never return instead of just grabbing $1 out of their wallet is pretty small.

Heck, it's faster to pay in cash at the convenience store than swipe...wait...press "credit"...wait...press "OK" on the total...wait....sign...wait...

[GEORGE]

The reality is that MOST people do not live their lives around whether a store will take their credit card for a fifty cent purchase.

Word.

 

Nor would most stores care about a single customer or two going "elsewhere" because of a credit card policy. Esp if that customer was only going to create a loss by charging what should be pocket change.

Many ASSUME that when somebody charges under $1 that they ALWAYS do that

 

Like last week they were not there spending $100+

 

The week before they spent $250

 

(THAT WAS THEIR TWIN BROTHER)

 

They don't always spend real big...but they don't ALWAYS spend less than $1 either

 

I suspect the number of people who would leave the store and never return instead of just grabbing $1 out of their wallet is pretty small.

Heck, it's faster to pay in cash at the convenience store than swipe...wait...press "credit"...wait...press "OK" on the total...wait....sign...wait...

CASH IN MY WALLET TOTALS $0.00

 

I do have some vending machine change in my pocket

Edited October 21, 2009 by GEORGE